MSE News: Interest-only mortgages could be 'thing of the past'

RenovationMan

gingeralan wrote: »

It is not possible for your bank to really make an accurate decision on this basis.they only look back 3 months, so if you wanted to you could really cut your attending down for 3 months before applying for the mortgage.

Income multiples may be boring but they work, simple. There is no option for some spotty salesman to try and dupe you into a life of servitude with a mortgage you can't afford.

Hold on, so looking into all aspects of your income and outgoings, debts etc, even if it is just over a 3 month period, is not enough information to make an accurate picture of someone's financial state, but just taking their (gross) salary amount and multiplying it by 3.5 is?

So one person on a £40k salary with car finance to the tune of £300pm, a £10k credit card debt, a personal loan of £15k (his house deposit) should be loaned the same as someone on £40k salary, with no debts and with £15k savings in the bank?

Honestly?

gingeralan

RenovationMan wrote: »

Hold on, so looking into all aspects of your income and outgoings, debts etc, even if it is just over a 3 month period, is not enough information to make an accurate picture of someone's financial state, but just taking their (gross) salary amount and multiplying it by 3.5 is?

So one person on a £40k salary with car finance to the tune of £300pm, a £10k credit card debt, a personal loan of £15k (his house deposit) should be loaned the same as someone on £40k salary, with no debts and with £15k savings in the bank?

Honestly?

If your idea is so good why have we gone from the average house being roughly 3 to 4 times the average wage to 6 or 7?

affordability only measures if you can make your monthly payment, not it you have the means to clear your debt under your scheme as was atty the height of the crisis purple would be able to borrow more on i/o than repayment.

Really if you don't have a regular relatively secure income (no such thing as a job for life etc.) Should you betaking a 25 year commitment? I think not

RenovationMan

jaysb wrote: »

I gone from IO with endowment, to part repayment part IO (following endowment shortfall projections) and now back to 100% IO (although I've cashed my endowment) so remaining mortgage is only 40% of original, and intending to make overpayments or ISA savigns to clear that in the next 5 years.....in hindsight I wished I had choosen repayment but the IO allowed me to get on the housing ladder as it was more affordable at that time.

IO could be a ticking timebomb for many in the next 10-15 years, if they bury their head in the sands and don't have a means to repay the capital.

IO suits some, I have done a mixture of contract/perm role, but you have to be responsible and reassess as your situation changes. Whereas I guess, repayment is both less risk and less effort.

Now that I'm knocking into the capital I did think should I switch to repayment for say 10 years and then make overpayments, or keep with my IO. I've decide to keep IO, make overpayments/ISA savings - but can't see there's a great deal in it - as I'm fully aware of the end goal of being MFW in 5 years.

You make some good points, the main one I'll comment on is responsibility. I think individuals should be responsible for their own actions. If people overstretch themselves and buy a house that they can't afford (or indeed run up credit card debts buying other stuff they can't afford), if people invest their money in Icelandic banks that go bust, if people run across a motorway and something bad happens then it's their fault. I hated all the mothering we had by the state during Labour's term of office and I hate it now when everyone is impacted by laws created to protect a few idiots from themselves.

If someone gets an IO mortgage and makes no payments off the capital for 25 years, what did they think would happen at the end of the mortgage? It's their own lookout. I don't need a warning label on my McDonalds coffee saying "Warning this beverage is hot", I know it is. Indeed, it had better be because I don't want cold coffee!

RenovationMan

gingeralan wrote: »

If your idea is so good why have we gone from the average house being roughly 3 to 4 times the average wage to 6 or 7?

affordability only measures if you can make your monthly payment, not it you have the means to clear your debt under your scheme as was atty the height of the crisis purple would be able to borrow more on i/o than repayment.

Really if you don't have a regular relatively secure income (no such thing as a job for life etc.) Should you betaking a 25 year commitment? I think not

You haven't commented on my salary multiples example. Answer that and we can move onto this.

gingeralan

RenovationMan wrote: »

You make some good points, the main one I'll comment on is responsibility. I think individuals should be responsible for their own actions. If people overstretch themselves and buy a house that they can't afford (or indeed run up credit card debts buying other stuff they can't afford), if people invest their money in Icelandic banks that go bust, if people run across a motorway and something bad happens then it's their fault. I hated all the mothering we had by the state during Labour's term of office and I hate it now when everyone is impacted by laws created to protect a few idiots from themselves.

If someone gets an IO mortgage and makes no payments off the capital for 25 years, what did they think would happen at the end of the mortgage? It's their own lookout. I don't need a warning label on my McDonalds coffee saying "Warning this beverage is hot", I know it is. Indeed, it had better be because I don't want cold coffee!

Please, you cannot compare the hot coffee warning (which I agree is ludicrous) to mortgages.

You have to remember that most people do bit have the knowledge to make informed decisions that is why they go to see advisors. Everyone has been led to believe home ownership is the be all and end all. Therefore with that anise in mind they will take the cheapest option available to them. Unless you spend a long time (I have done this kind of job) explaining the pitfalls, they just do not appreciate the risk of saving 100 quid a month at the expense ofhaving to find the loan amount at the end of the term.

I agree people need to take responsibility but for this they need to be informed consumers which as a rule we don't have now.

RenovationMan

gingeralan wrote: »

Please, you cannot compare the hot coffee warning (which I agree is ludicrous) to mortgages.

Didn't you just compare Uranium to an IO mortgage?

gingeralan wrote: »

I agree people need to take responsibility but for this they need to be informed consumers which as a rule we don't have now.

Then the solution is to force lenders to explain their products better, not to remove the product completely. A chainsaw is a pretty dangerous piece of kit, so do we ban them or do we only sell them to people who have had training (and have a certificate to prove it)? Same with a car - that's a dangerous item in inexperienced hands. Should we ban them all or should we train people to use them safely?

As to your point about people not understanding. If someone doesn't understand that if you take out a loan and only pay the interest back that you still owe the debt, then perhaps that person shouldn't be loaned any money under any circumstances.

shortchanged_2

So RenoMan, what would be your solution to a more stable and sustainable housing market in the medium to long term, bearing in mind the large financial commitment FTB'ers are expected to make just to get a foot on the ladder these days?

RenovationMan

shortchanged wrote: »

So RenoMan, what would be your solution to a more stable and sustainable housing market in the medium to long term, bearing in mind the large financial commitment FTB'ers are expected to make just to get a foot on the ladder these days?

The thread is entitled "Interest-only mortgages could be a 'thing of the past'". If you want to talk about the housing market, then I suggest you create a new thread about that on the house price board. This is the mortgages & endowment board and we are discussing mortgages.

Please don't hijack threads. :cool:

sterlingstash

I think that most of us agree that IO is a useful product for the right sort of borrower. But in these troubled times it is all about what is good for the bank. What they're interested in is minimising risk at the moment.

If I was a lender, I know I'd much prefer being able to keep track of repayments coming into an account with the surety of knowing the borrower is on track to repay. Why would I want to take the risk on IO and then have to try and keep tabs on whether they have a means of repayment? If they get to the end of the term and can;t repay, what then? - messy (and expensive) repossession.

So can we berate Santander for tightening up on IO? Isn't the question, why wouldn't they?!

sterlingstash

PS - a great example of just this risk to Santander in the 'Due for Renewal' thread. What I think the poster actually means is that the mortgage is 'Due for Repayment'!! Quite different things, but clearly easily confused in some peoples minds!

And the poster is trying to make out that poor old Santander are 'unhelpful' for saying 'I want my money back like we agreed'!!!